Not charging interest, or charging below-market interest, on current accounts with shareholders and related companies can amount to a disguised profit distribution through transfer pricing. An invoice is issued and VAT is charged on interest calculated in this way.
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Transfer pricingThe pricing of goods, services and financing transactions between related persons; tax legislation requires these prices to be at arm's length.Disguised profit distributionTransferring corporate profits to shareholders or related persons outside the tax base through transactions with related persons at prices or amounts that are not at arm's length.Related partyA person or entity that has a relationship of control, joint control or significant influence with the reporting entity.Advance taxTax paid in advance during the year by income and corporate taxpayers, in quarterly periods, on current-period earnings.Arm's length principleThe principle that transactions between related persons should be carried out at the prices and on the terms that would apply between independent parties with no such relationship.Capital gainGains of individuals from disposing of certain assets and rights that are subject to income tax.
Last updated: October 22, 2026 · This definition is for general information only.